# Prop. Treas. Reg. § 1.128-3: Nondiscrimination requirements. Proposed regulation, not in force. REG-101355-26, 91 FR 51611, published 2026-08-11 . Interprets 26 U.S.C. § 128. Par. 2. Sections 1.128-1 through 1.129-2 are added to read as follows: (a) Contributions and benefits. The contributions or benefits provided under the Trump account contribution program must not discriminate in favor of HCEs or their dependents. A Trump account contribution program that provides benefits on the same terms for all eligible employees satisfies this requirement. For example, a term that allows all NHCEs to reduce salary in the same amount as HCEs does not discriminate as to contributions or benefits. (b) Eligibility —(1) In general. The program must benefit employees who qualify under an eligibility classification established by the employer that is reasonably based on objective business criteria in satisfaction of paragraph (b)(2) of this section and not found by the Secretary to be discriminatory in favor of HCEs or their dependents in satisfaction of paragraph (b)(3) of this section. For these purposes, an employee is eligible under the program only if the employee had a meaningful opportunity to receive benefits, via salary reduction or otherwise, regardless of whether any benefits were actually received. (2) Reasonable eligibility classification established by the employer. An eligibility classification must be, based on all facts and circumstances, reasonable and established under objective business criteria that identify the category or categories of employees who are eligible under the plan. Reasonable classifications generally include specified job categories, nature of compensation (that is, salaried or hourly), geographic location, and similar bona fide business criteria. An enumeration of employees by name or other specific criteria having substantially the same effect as an enumeration by name is not considered a reasonable classification. (3) Nondiscriminatory classification —(i) In general. An eligibility classification must be found by the Secretary not to be discriminatory in favor of HCEs or their dependents. A classification is nondiscriminatory for a plan year if and only if the group of employees included in the classification eligible under the plan satisfies the requirements of either paragraph (b)(3)(ii) or (iii) of this section for the plan year. (ii) Facts and circumstances. A plan satisfies the requirements of this paragraph (b)(3)(ii) if and only if, based on all the relevant facts and circumstances, the Secretary finds that the classification is nondiscriminatory. No one particular fact is determinative. Included among the facts and circumstances relevant in determining whether a classification is nondiscriminatory are the following— (A) The underlying business reason for the classification. The greater the business reason for the classification, the more likely the classification is to be nondiscriminatory. (B) The percentage of the employer's employees eligible under the plan. The higher the percentage, the more likely the classification is to be nondiscriminatory. (C) Whether the number of employees eligible under the plan in each salary range is representative of the number of employees in each salary range of the employer's workforce. In general, the more representative the percentages of employees eligible under the plan in each salary range, the more likely the classification is to be nondiscriminatory. (D) The difference between the plan's ratio percentage (within the meaning of paragraph (b)(3)(iii)(A) of this section) and the employer's safe harbor percentage (within the meaning of paragraph (b)(3)(iii)(B) of this section). The smaller the difference, the more likely the classification is to be nondiscriminatory. (iii) Safe harbor. A plan satisfies the requirements of this paragraph (b)(3)(iii) for a plan year if and only if the plan's ratio percentage (as defined in paragraph (b)(3)(iii)(A) of this section) is greater than or equal to the employer's safe harbor percentage (as defined in paragraph (b)(3)(iii)(B) of this section). (A) Ratio percentage. For purposes of this paragraph (b)(3)(iii), with respect to a plan for a plan year, the plan's ratio percentage means the ratio expressed as a percentage (rounded to the nearest hundredth of a percentage point) determined by dividing the eligibility percentage of NHCEs by the eligibility percentage of HCEs, as such eligibility percentages are defined in paragraph (b)(3)(iii)(C) of this section. (B) Safe harbor percentage. The safe harbor percentage of an employer is 90 percent, reduced by 3/4 of a percentage point for each whole percentage point by which the NHCE concentration percentage exceeds 60 percent. (C) Eligibility percentage. The eligibility percentage of NHCEs is determined by dividing the number of NHCEs who are eligible under the plan by the total number of NHCEs of the employer. The eligibility percentage of HCEs is determined by dividing the number of HCEs who are eligible under the plan by the total number of HCEs of the employer. In determining these eligibility percentages, employees described in paragraph (e) of this section are excluded. (D) NHCE concentration percentage. The NHCE concentration percentage of an employer is the percentage of all the employees of the employer who are NHCEs. (c) Average benefits test —(1) In general. A plan satisfies the requirements of this paragraph (c)(1) if the average benefits provided to employees who are NHCEs under all Trump account contribution programs of the employer is at least 55 percent of the average benefits provided to HCEs under all Trump account contribution programs of the employer. (2) Average benefits provided —(i) General rule. For purposes of paragraph (c)(1) of this section, the average benefits provided to a group of HCEs or NHCEs for a plan year equals the total dollar amount of contributions provided under all Trump account contribution programs of the employer during the plan year to employees in that group, divided by the number of employees in that group to whom any such contributions are provided during the plan year, via salary reduction or otherwise. (ii) Employees taken into account. For purposes of applying the calculation in paragraph (c)(2)(i) of this section, any individual employed by the employer on any day of the plan year is taken into account in the denominator if: (A) The employer makes a section 128 contribution to a Trump account as to which the employee or the employee's dependent is the beneficiary during the plan year, via salary reduction or otherwise; and (B) The employee is not described in paragraph (e) of this section. (3) Time to perform nondiscrimination test. The requirements of this paragraph (c) must be satisfied as of the last day of the plan year. (4) Salary reduction agreements. For purposes of this paragraph (c), in the case of any benefits provided through a salary reduction agreement, a plan may disregard any employee whose compensation is less than $25,000. For purposes of this paragraph (c)(4), the term “compensation” has the meaning given such term by section 414(q)(4). (5) Correction of nondiscrimination failures —(i) In general. If a plan fails the requirements of the average benefits test of this paragraph (c) as of the last day of the plan year, the plan may nonetheless be treated as satisfying the requirements with respect to HCEs and their dependents if the plan takes remedial action as described in paragraph (c)(5)(ii) of this section. (ii) Remedial measures —(A) Correction. If a Trump account contribution program fails to satisfy the requirements of this paragraph (c) as of the last day of the plan year, the plan may be treated as satisfying those requirements by including in income any excess benefit amounts received by HCEs. For this purpose, an excess benefit amount is included in income if the amount is treated by the employer as gross income and, to the extent applicable, wages within the meaning of sections 3401, 3121, and 3306, and compensation within the meaning of section 3231, and reported as such with respect to the year being tested by the deadline prescribed in § 31.6051-1(d)(1)(i) of this chapter for furnishing statements on Form W-2, Wage and Tax Statement, for the year in which the excess benefits were received. In addition, because the excess benefit amounts are not provided under a Trump account contribution program, the plan must provide a corrective notice as provided in § 1.128-2(h)(4). (B) Allocation of excess benefits. ( 1 ) If all HCEs have section 128 contributions in excess of the quotient of the amount of the average section 128 contribution for all NHCEs divided by 0.55, the amount of excess benefits to be included in income of each HCE is the excess of the amount of that HCE's section 128 contribution over that quotient. ( 2 ) If not all HCEs have section 128 contributions in excess of the quotient of the amount of the average section 128 contribution for all NHCEs divided by 0.55, the plan may allocate the reduction of section 128 contributions among HCEs in any reasonable manner, including methods for apportioning distributions of excess amounts similar to those used in § 1.401(k)-2(b)(2)(iii). (d) Safe harbor for contributions made with respect to pilot program amounts —(1) In general. Contributions under a pilot match contribution arrangement described in paragraph (d)(2) of this section are disregarded for the purposes of paragraphs (a) and (c) of this section. (2) Pilot match contribution arrangements. A pilot match contribution arrangement must— (i) Be designed to provide contributions to Trump accounts because the account beneficiary is: (A) A dependent of an employee; and (B) An eligible child within the meaning of section 6434(c); and (ii) Make contributions under the arrangement available on the same terms and conditions to all employees not described in paragraph (e) of this section. (3) Establishment of eligibility. An arrangement will not fail to be a pilot match contribution arrangement because the arrangement relies on reasonable measures to establish that an employee's dependent is an eligible child within the meaning of section 6434(c). For this purpose, employee certification of a dependent's date of birth is a reasonable measure to ensure eligibility. (4) Additional section 128 contributions. If an employer makes contributions under a pilot match contribution arrangement described in paragraph (d)(2) of this section and also makes section 128 contributions that are not under such an arrangement, via salary reduction or otherwise, such contributions that are not pilot match contributions must separately satisfy paragraphs (a) and (c) of this section. In determining whether paragraphs (a) and (c) of this section are so separately satisfied, the pilot match contributions may be disregarded. (e) Excluded employees. For purposes of paragraphs (b) and (c) of this section, there shall be excluded from consideration— (1) Subject to rules similar to the rules of section 410(b)(4), employees who have not attained the age of 21 and completed one year of service (as defined in section 410(a)(3)); and (2) Employees not included in a Trump account contribution program who are included in a unit of employees covered by an agreement that the Secretary finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that the Trump account contribution program was the subject of good faith bargaining between such employee representatives and such employer or employers. (f) Contributions taken into account. For purposes of paragraphs (a), (b), and (c) of this section, an employer's contributions to the Trump account of an employee or an employee's dependent outside any Trump account contribution program (such as taxable contributions in excess of the § 1.128-2(d)(5) annual limit) are not taken into account. (g) Effect of failure. Except as otherwise provided in paragraph (c)(5) of this section, if a plan would qualify as a Trump account contribution program but for a failure to satisfy one or more of the requirements of this section, then the plan is not a Trump account contribution program with respect to HCEs. Notwithstanding such failure, the plan is treated as a Trump account contribution program with respect to employees who are NHCEs. (h) Examples. The following examples illustrate the rules in this section. (1) Example 1. For 2026, an employer has 15 HCEs and 15 NHCEs. The employer maintains a Trump account contribution program funded solely via salary reduction elections made by employees under the employer's section 125 cafeteria plan. All 30 employees are eligible to make salary reduction elections under the plan on the same terms. Eleven of the HCEs elect benefits under the plan of $2,500 each, and four of the NHCEs elect benefits under the plan of $2,500 each. The remaining employees elect no benefits under the plan. The average benefits provided to the HCEs is $2,500 ($27,500/11) and the average benefits provided to the NHCEs is also $2,500 ($10,000/4). Accordingly, the average benefits provided to the NHCEs is 100 percent of the average benefits provided to the HCEs, and the required threshold of 55 percent under paragraph (c)(1) of this section is satisfied. (2) Example 2. For 2026, an employer has 15 HCEs and 15 NHCEs. The employer maintains a Trump account contribution program funded solely via salary reduction elections made by employees under the employer's section 125 cafeteria plan. All 30 employees are eligible to make salary reduction elections under the plan on the same terms. Eleven of the HCEs elect benefits under the plan of $2,500 each; one of the NHCEs elects benefits of $2,500; three of the NHCEs elect benefits of $1,500; one of the NHCEs elects benefits of $1,000; and two of the NHCEs elect benefits of $500, for a collective $9,000 in benefits provided to seven NHCEs, and an average benefits provided to NHCEs of $1,285.71 ($9,000/7). The average benefits provided to the HCEs is $2,500 ($27,500/11). Accordingly, the average benefits provided to the NHCEs is 51.4 percent of the average benefits provided to the HCEs ($1,285.71/$2,500), and the required threshold of 55 percent under paragraph (c)(1) of this section is not satisfied. (3) Example 3. The facts are the same as in paragraph (h)(2) of this section ( Example 2 ) except that the following four NHCEs are excluded employees within the meaning of paragraph (e) of this section: two of the NHCEs who elected benefits under the plan of $1,500; and the two NHCEs who elected benefits of $500. With the exclusion of these employees, a collective $5,000 in benefits are provided to three NHCEs, and the average benefits provided to NHCEs is $1,666.67 ($5,000/3). Accordingly, the average benefits provided to the NHCEs is 66.7 percent of the average benefits provided to the HCEs ($1,666.67/$2,500), and the required threshold of 55 percent under paragraph (c)(1) of this section is satisfied. (4) Example 4. The facts are the same as in paragraph (h)(2) of this section ( Example 2 ) except that on or before the furnishing deadline for the Form W-2 for the year in which the benefits were provided, the employer treats $500 of the benefits elected by each of the HCEs as gross income and wages for the year in which the benefits were provided, reducing the benefits provided to the HCEs to a collective $22,000 in benefits provided to 11 HCEs, reducing the average benefit to HCEs to $2,000 ($22,000/11). Accordingly, the average benefits provided to the NHCEs is 64.29 percent of the average benefits provided to the HCEs ($1,285.71/$2,000), and the required threshold of 55 percent under paragraph (c)(1) of this section is satisfied. (5) Example 5. The facts are the same as in paragraph (h)(3) of this section ( Example 3 ) except the employer also makes a contribution of $1,000 that is not excludable from income under section 128 (a non-section 128 contribution) to each of the employees who elected benefits under the plan. The taxable employer contributions are not considered when calculating the average benefits. Accordingly, the conclusion is the same as in paragraph (h)(3) of this section ( Example 3 ). (6) Example 6. The facts are the same as in paragraph (h)(1) of this section ( Example 1 ) except that the 11 NHCEs to whom benefits are not provided are not eligible to elect benefits under the terms of the plan. The 11 excluded NHCEs are not excluded employees within the meaning of paragraph (e) of this section. The plan has discriminated in favor of HCEs as to eligibility and thus does not satisfy the requirements of paragraph (b) of this section. Thus, the plan is not a Trump account contribution program with respect to HCEs and the benefits provided to HCEs are included in their income and wages within the meaning of sections 3401, 3121 (or compensation within the meaning of section 3231), and 3306. Because the benefits are not provided under a Trump account contribution program, the plan must provide a corrective notice as provided in § 1.128-2(h)(4). (i) Applicability date. This section applies to plan years beginning on or after the date of publication of the final rule in the Federal Register .